• Industry: Retail, Food, Drink & Consumer Goods
  • Type: Business and industry issue, Publication series
  • Date: 6/17/2014

World Cup economics 

World Cup economics
Whichever team wins in Brazil, will the finals help the host nation – and big-spending sponsors – fulfill their goals?

“Brazil is a country that likes to party,” says Carlos Pires, Partner and Head of Consumer Markets at KPMG in Brazil. This month, it is inviting citizens, fans, broadcasters and brands to join the FIFA World Cup party.

“The finals are expected to attract 600,000 foreign tourists – and could generate US$2.7bn in revenue”

The quadrennial football fest is the biggest showcase for the world’s consumer brands in 2014 – and a game-changing opportunity for the host nation to persuade the world to look beyond sun, samba and, ironically, soccer. The event is expected to attract 600,000 foreign tourists and 3m from within Brazil – and could generate US$2.7bn in revenue, though some analysts fear “World Cup couch potatoes” will dampen retail sales.

The long-term impact of the event – especially of the country’s US$10.5bn infrastructure investment – is central to Brazil’s goal of becoming the world’s fifth largest economy by 2023 (it is now seventh, behind the UK).

Private finance has funded 15% of these investments, which represent 5% of the budget for Brazil’s ambitious growth program. Pires notes the funding will improve stadiums, transport and internet services in a dozen host cities at the same time. “The difficulty is that, since 2007 when Brazil was awarded the World Cup, the economic climate has changed significantly,” says Pires. This has led to protests that the money should be spent on schools and hospitals. Yet Brazil is passionate about soccer and it is hard to predict the nation’s mood if it wins the competition for a sixth time.

For the event’s top line sponsors and partners – which include adidas, Anheuser-Busch InBev, Johnson & Johnson, McDonald’s and Sony – the benefits could be spectacular. Sportswear giant adidas has talked of a US$1bn boost in revenue. For Anheuser-Busch Inbev, the goal is to make Budweiser the “Coke of beers” and to increase the Budweiser brand’s footprint in Africa and South America.

Most of the World Cup’s 14 sponsors and partners have long-term deals with FIFA. The big brands are keen to avoid blunders like that made by Eastman Kodak when Los Angeles hosted the Olympics in 1984. The photographic giant dithered over sponsoring the games, allowing rising rival Fuji to promote its film to millions of North American consumers for the first time and sideline Kodak in the public’s consciousness.

For the brands that sponsor these mega-events, it’s not just about the revenue you generate – it’s the revenue you deny the opposition.

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